Molefe should never have had an Eskom pension, fund’s head tells MPs
Parliament’s inquiry into state capture hears how Eskom bought 13 years of extra service for its disgraced CEO
Former Eskom CEO Brian Molefe should never have qualified to be a member of the power utility’s pension and provident fund as he was not a permanent employee, Parliament heard on Friday.
Appearing before Parliament’s public enterprises committee, which is holding an inquiry into the capture of state-owned entities, Sibusiso Luthuli, the CEO of the Eskom Pension and Provident Fund, suggested the utility had misrepresented Molefe’s employment status, which allowed him to be a member of the fund.
Molefe was employed on a five-year contract and, according to the fund’s rules, only permanent employees qualify.
Molefe received a R30.1m "golden handshake" from the power utility after he left its employ in December 2016, despite having worked for 16 months.
His departure followed damning findings made against him by former public protector Thuli Madonsela in her State of Capture report.
Molefe became an ANC MP in February‚ but returned to Eskom in May after Public Enterprises Minister Lynne Brown refused to approve the R30.1m pension.
Less than a month into his job at Eskom‚ Brown instructed the board of Eskom to rescind its decision to reappoint Molefe. Eskom formally dismissed him on June 2.
The Public Protector is also investigating the decision to award Molefe the R30.1m pension.
Luthuli told MPs on Friday that they had received correspondence from the Hawks indicating their desire to investigate Molefe’s pension matter.
Explaining how the pension amount was calculated, Luthuli said Eskom had bought Molefe additional service in years, which was permissible under the fund’s rules. This in theory meant Molefe had served an additional 156 months on top of the 16 months he had actually served, explained Luthuli.
Luthuli said the final R30.1m pension was based on a complex actuarial calculation which included Molefe’s annual salary of R5.6m, the additional 156 months bought by Eskom, and the fact that he had married a younger wife in December 2016 [this further pushed up his pension].
Molefe had also transferred R4.2m he had in pension with his former employer, Transnet, to the Eskom pension fund.
Luthuli said then Eskom board chairman Ben Ngubane had signed off on Molefe’s early retirement and requested that penalties be waived. The fund’s rules allowed employees to take early retirement at 50, based on the employer’s discretion. Molefe was turning 50 in January 2017, and so the purchase of the additional service — 156 months or 13 years — theoretically meant he was retiring at 63.
The R30.1m was paid into the fund by Eskom to cover the actual cost of the Molefe’s pension.
Luthuli said Molefe chose to cash in a third (about R7.9m after tax). The fund retained two-thirds of the total pension, which allowed Molefe to receive about R111,000 a month in pension payouts.
It also emerged during the inquiry that Molefe’s pension payout was incorrectly taxed as SARS had based its calculations on wrong information provided by the pension fund.
Following widespread condemnation, Molefe’s pension payouts were suspended earlier this year pending an investigation, and the conclusion of a court case brought by trade union Solidarity.
During cross-examination by the inquiry’s evidence leader, Ntuthuzelo Vanara, Luthuli conceded that Molefe would not have been a member of the pension fund had there been full disclosure on Eskom’s part.
"We gained legal advice which indicated that the eligibility rules state that you must be permanently employed … he [did not qualify to be] a member of the fund in the first place, we rely on Eskom providing accurate information … and we expect Eskom to know the rules.
"All past CEOs were permanent and therefore we had no reason to doubt their information," said Luthuli.
He said Eskom had submitted Molefe’s file when he joined, which was marked "PPX", denoting that he was a permanent employee, but in actual fact he was on a five-year contract.
Vanara also questioned Luthuli about whether he was concerned that a pension fund could be used as a conduit to pay individuals using stolen money, because of the open-ended rule that allows Eskom to buy any amount of additional service for an employee, such as was done for Molefe.
"From the fund’s point of view we had no reason to be concerned as additional service [was] purchased within the rules. The rules do not cap additional service," he said.
"In hindsight there are certain [things] we can learn from this process … the [pension fund] board is revisiting the rules, obviously that’s a negotiated process that will be negotiated with all stakeholders," said Luthuli.
"We have taken corrective action where we can and we are revisiting the rules."
EFF chief whip Floyd Shivambu said it appeared the Eskom pension fund was being used to launder money and the matter should be further investigated.
Acting committee chairperson Zukiswa Rantho said the mismanagement of funds at Eskom was "worrying".
"I am worried about the Eskom fund … it works for executives, I am worried about a sweeper or a cleaner at Eskom … Eskom is a state-owned company which gets money from state. If there is this mismanagement of funds I am really worried."
Earlier, it emerged that the Gupta-linked Black First, Land First (BLF) had written a letter to Parliament threatening legal action should the public enterprises portfolio committee continue with the inquiry.
BLF said in the letter the inquiry’s direction was not clear, and it appeared to be a witch hunt against the Guptas.
MPs dismissed the letter and vowed to continue with the inquiry.